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Time for time-and-a-half? Exploring the evidence and policy options on overtime

Discussion around the Taylor Review and quality of work has often focused on zero-hours contracts and the gig economy. But one idea the Taylor Review raised could impact a far larger group: those doing paid overtime. Overtime working is a big deal in our labour market and attention on it is long overdue.

One in ten employees work overtime. Although this proportion is noticeably lower than in the mid-1990s, these additional hours typically comprise 12 per cent of the weekly wages of those doing overtime,

While the pay premium associated with overtime working has declined – just half of employees doing overtime in 2016 were paid at least 10 per cent more than their standard hourly wage

Our lack of focus on overtime has left the UK as something of an outlier internationally, with many countries placing restrictions on the volume of overtime working, introducing protections for affected employees or, as the Taylor Review suggested, requiring (some) employees doing overtime to be guaranteed a minimum pay premium above their regular wage.

The Taylor Review has opened the door to new policy thinking and experimentation around overtime policy to better address these concerns. In its response, the Government should take this opportunity to offer more workers with overtime greater security and certainty. Some steps, like protections for those turning down additional hours or action to discourage last-minute scheduling, should be relatively straightforward.

But changes to legislation affecting the rate at which overtime is paid are likely to have larger, more unpredictable effects. For instance, while a premium may incentivise firms to shift towards contracts that better reflect the working patterns of their staff, some may instead choose to simply offer fewer total hours, resulting in lower weekly wages for some workers.

Given this uncertainty, the Government should pilot a range of overtime premia in a handful of sectors.

While there are a variety of ways in which this could be implemented, a premium somewhere between 10 per cent and 50 per cent (time-and-a-half) would reflect current practice among firms.

Because the issues discussed above are not exclusive to the very lowest earners at the wage floor, the pay threshold below which the policy should apply should be trialled too.